BY MIKE CETERA
Aren't tax rebates and other incentives supposed to be used to lure businesses to town when they otherwise wouldn't come or keep them here when otherwise they'd leave? At least, that's the way it used to work in Aurora.
But now we're talking about giving a business -- which already has a tax rebate -- another one to help it expand. What precedent does this set? And is this really what this government carrot is supposed to be used for?
The Aurora Economic Development Commission, which is supporting a new tax rebate for Valley Honda on the city's far East Side, used to think differently.
In 2001, AEDC Executive Director Sherman Jenkins stated the philosophy on tax rebates as such: "It's a way of spurring (development) on. You don't continue giving it." (emphasis added)
Times have changed.
Let's look at this deal that could see the city forfeiting more than $4 million in sales-tax revenue over the next decade:
Rationale: Valley Honda should get this money in order to keep the business here.
Reality: The current 10-year rebate deal -- set to expire this year -- requires the business to remain in Aurora for 20 years or forfeit all or part (haven't seen the agreement language) of the rebate it already has received.
Owner Robert Navarre said expanding and upgrading the existing facility is cheaper than relocating. He said sales have doubled at the current location in the last three years.
Rationale: Haven't we done this before? What's the big deal?
Reality: In 2000, the City Council approved an incentive package for the owners of a bar on the far East Side. The relocated and renamed facility became The Foundry. But approval of a property tax rebate plan was capped at just $250,000 after extensive negotiations.
The 1998 Valley Honda (then Valley Imports) deal kept the business in Aurora (thus keeping the tax dollars here). The city has enjoyed the business' financial success in the form of tax revenue, while rebating more than $2 million back to the dealership.
I haven't found any instance where the city gave a second rebate to an existing business. Don't you think this might entice some of the other businesses to come forward seeking more money?
UPDATE: I was wrong. This has happened before -- to Valley Imports. The dealership first received a rebate in 1992, estimated at the time to be a sales tax refund of about $290,000 over five years. In exchange, the dealership agreed to expand his business and keep it in Aurora for 10 years.
The second rebate came in 1998, when Valley Imports moved from New York Street to Route 34.
Rationale: Successful businesses should be rewarded.
Reality: Government would go bankrupt using this approach.
Rationale: The dealership has been mandated by its corporate parent to make dealership improvements. Shouldn't government help them out?
Reality: Look, we all have increased expenses from time to time. But the government ain't offering me any help. And what's to prevent another business with another corporate mandate from saying, "Hey, me too?"
Oh wow, I'm not a fan of a second rebate for Honda. I think the city can use half a million dollars (a year) on other projects. I especially disapprove if they are required to stay in town for another 10 years from the first rebate agreement.
I noticed the article mentioned that the aldermen offered little discussion about the plan. Does that mean they are not seriously considering the plan?
Here is a question...
Does Naperville give tax breaks to all of those dealerships on Ogden than expanded or relocated in the last few years?
Here is one that I think @6 will really appreciate.
Let’s look at the economics of this; specifically, opportunity cost.
If Valley Honda feels that they can retain their existing revenue (and growth) by moving on the other side of 59 (including the forfeiture of their 10 year rebate deal), then moving is an option today. Otherwise, they are better staying here without another hefty rebate.
Time to play chicken!
To answer the question posed earlier by @6, the "little discussion" by aldermen gave the impression they will support this.
The few questions asked were, quite frankly, things clearly spelled out in agreement, so it wasn't clear why they were raised in the first place.
A couple others asked about similar agreements in the past and what Naperville offers.
Nothing definitive, but a search of our archives produced this from 1992: "In the past decade, Aurora has lost at least four car dealerships, three of which moved to Naperville. But none of the dealerships that left Aurora did so because another city offered them a tax break."
North Aurora also offered rebates in getting dealerships to move to the auto mall off of I-88.
Thanks Dan,
Are you freaking serious?! I think this is ridiculous.
Now I'm more curious as to specifics of the original 10 yr rebate. Can we confirm the 20 year residency rule? If this is true, the city has the upper hand and Honda is not going anywhere.
If sales have doubled in the last three years they can fund their own expansion!
Do we need to protest? or make some phone calls? I wonder whats more effective.
This must be serious if the Beacon-News and OpenlineBlog.com are both outraged about this at the same time, but in OpenlineBlog.com's story on this, they also reveal the owner of Valley Honda has been giving thousands of dollars to Tom Weisner's campaign.
So, while I agree there is no justification for the giveaway of millions and it violates the previous rebate, it seems this has more to do with rewarding a campaign contributor than sound economic development policy or wisdom.
This is another reason we need to expedite the campaign finance ordinance proposed by Alderman Lawrence.
I think the sales tax rebate for Valley Honda is extremely irresponsible.
FROM MIKE CETERA:
Please see the update above. I did some more checking, and it appears this would be the third rebate offered to this dealership (under two different owners). I'm not sure if that makes the idea better or worse.
It seems like this is the first issue everyone here agrees on! (Have we caught the Obama Virus? *sings Kumbaya*)
I don't see the correlation between donations to Weisner's campaign and Aldermen voting on the issue. Unless you are referring to the AEDC support of it. I'm not aware of the relationship between AEDC and the Mayors Office but supporting that type of development is definetly in the scope of the group. I just wish they analyze whether or not it is in the best interest of the city to support Valley Honda. Maysonet's statement quoted in the Beacon was a weak justification for renewing the tax rebate.
Alderman Rick Lawrence is the only one so far on the city council I'm aware of that raised questions about the giveaway, the precedent and the cost to taxpayers.
As for the relationship between the AEDC and the mayor's office, this deal is being coordinated by the mayor's office, but the AEDC's board are Weisner's campaign cronies.
Personally, I think this is a 4 million dollar mistake being made and I think the campaign contributions from Valley Honda's dealer are the driving force.
But the Aldermen (not the "Mayor cronies") vote on the issue, correct? So I don't see the logic in associating 'campaign contributions' to Weisner, with a vote from Aldermen (some of which are his opponent in the next election).
Jeff, you seem like a player hater because the campaign contributions are unrelated to the individuals who will approve the plan.
I also don't like it when people refer to groups as "cronies" because it is so vague of description and then it encompasses way more people than would probably actually fall into that category. You might as well use names and be specific as to who you are talking about, especially since most of you hide behind Anonymous or don't use a surname.
Finally an interesting blog topic. I had thought the beacon was asleep with the other "yawn" posts. This one is particularly interesting in that we have a repeat company that seems to always get subsidized at the taxpayers expense. When does it become the responsibility of the business to pay it's own way? Thus, it is a benefit for the City to have a long-standing business but one we have to pay to stay; not stay of it's own will. This is the most disturbing part.
To address @6; the Aldermen are part-time people; they don't read anything. The Mayor is in charge of AEDC and the deals that it brings forward. Thus the Mayor has control over what is presented to the Aldermen who don't read anything. If the deal is presented in a positive fashion and endorsed by AEDC or any other staff member for that matter; the Alderman will blindly follow. Now; the Mayor also likes to give pay-back for "yes" votes. McCarthy park and the almost million spent is surely paying for Alderman Garza's yes votes. The full color picture on the front page of the Beacon News of the Mayor with Alderman Keith and Mervine (all of these are up for re-election) is another form of compensation for "yes" votes. Lastly, although he is not up for re-election, Richard Irvin is being compensated for his "yes" votes by the formation of the minority contract committee -- which he is going to take full credit for. See; it's all pay to play politics.
Addressing Alderman Lawrence's proposal; it would have no effect on this subject. It is a City subsidy to keep one of the only new car dealerships in Aurora. The rest (except for the Suzuki dealer which received a subsidy too) are low budget used car lots.
Thanks Maggie. I see what you mean about the Aldermen now. I've only attended one meeting and I've gotten that vibe as well.
I emailed my alderman about this issue and she has not responded.
I love the saying "The Aldermen are like mushrooms; kept in the dark and only fed crap" That is what I see in Aurora.
Beacon Blog get your facts straight...Naperville bought land in an industrial district and built a multimillion dollar test track facility, which they continue to maintain as an incentive to dealerships. The city also forfeits the money the land would have eventually generated in tax revenue had it been developed.
Why did they do this? Because no other single retail business type generates as much sales tax revenue for a municipality than auto dealerships. Aurora has already LOST at least one dealership and the revenue that goes with it to Naperville. Forfieting a quarter to ensure Aurora continues receiving seventy-five cents for every dollar in sales tax revenue collected makes much better sense than losing the whole dollar.
It looks like it was passed. I'm very disappointed. It just doesn't make sense to help Honda when they already said its cheaper for them to stay and the owner says he is committed to making them stay.
Ugh.
Anonymous on July 8, 2008 11:59 AM,
Get some common sense.
Naperville spent 1.5 million on the track – not a multimillion price tag as you purport.
Naperville has 10 dealerships that have use of the track – or a benefit of 150K per dealership.
Aurora has spent over 2.5 million on a SINGLE Honda dealer over the past 15 years.
If this dealership leaves, they must pay the city 2 million dollars today. That’s about 3 million over 10 years, when you consider the time value of money.
On another note: I wonder if Robert Navarre’s $5,000 contribution (at an “anniversary dinner”) to the Mayor’s re-election campaign had anything to do with this $4+ million dollar giveaway.
I have common sense, but apparently you don't.
Naperville spent way more than 1.5 million on the track when you include the cost of the land. Do you really expect anyone to believe that it 10 acres of prime land plus construction really cost only 1.5 million. Please! That was only the construction cost. Not to mention the millions in LOST tax revenue from not developing that site.
Do you have any idea how much tax revenue is generated by that one dealership? It is the largest volume Hondda dealership in the midwest.
Anyone with half a brain realizes that investing a quarter to gain seventy-five cents is a very good business deal.